11 Sep Start-Up Funding Lessons From Gen.T Business Experts
By: Philippine Tatler | September 11, 2019
Source: Philippine Tatler
Through “Enter The World Of: Start-Up Funding,” Generation T honourees Paulo Campos and Mica Tan and Jason Fong of Allianz Global Investments Singapore gave attendees a look into what entrepreneurs should expect when they raise money for their new business ventures. Here are the lessons they’ve imparted.
Start-Up Funding Basics
When Paulo Campos co-founded Zalora at the near-end of 2011, he didn’t know yet that it would eventually become the largest fashion e-commerce player in Southeast Asia. They only had a small office with a staff of 10 people at the time, and an initial funding of two million pesos. Now, with its own logistics fleet and a total of 700 full-time employees, Zalora’s holding company Global Fashion Group is publicly listed on the Frankfurt Stock Exchange. This has made him familiar with the growth process a company experiences, and more importantly, the fundraising processes that it entailed.
THE FUNDING JOURNEY
Paulo advises those who are planning to start new business ventures to use the Airbnb pitch deck as an example of what to show potential investors. It answers key questions that they would typically ask:
- what is the problem you are trying to address and how do you plan to do it?
- Is there a need or demand for your product?
- How do you generate profit?
- Who are your competitors and what sets you apart from them?
- How have consumers responded to your product?
- How much do you need invested in your company?
Investors are typically concerned about the growth of a business and if investments are necessary to further it. “What I’ve seen investors do is challenging the scalability or the model of the business you have in mind,” Paulo says. “Challenging it is not to say that it’s a bad idea, but it’s to say that maybe you’re better off making a lot of money for yourself and not involving anyone else, depending on the nature of your business.”
Funding From an Investor’s Point of View
At 27 years old, Mica Tan is at the helm of the eponymous private equity firm, the MFT Group of Companies. Her firm boasts of an impressive portfolio that primarily focuses on the food and beverage, financial services, and healthcare sectors—particularly family legacy businesses. Private equity firms such as Mica’s come in when a business has already been through a series of investment rounds and are looking for further growth. “Many investors call it an exit but for many investors, exits are just the beginning.”
The best time for start-ups to raise money, she believes, is when the founders have carefully studied the potential of their brand and have all the necessary data points to prove it. They would then need to compute for their company’s pre-money and post-money valuations.
PRE- AND POST-MONEY VALUATIONS
To compute for the post-money valuation, divide the investment amount with the percentage the investor is getting. Then subtract the investment amount from the post-money valuation to get your pre-money valuation.
Mica finds that being diluted is also a concern for a number of business owners. To address this, start-ups can use stock splits to convert the shares multiple times and be able to proportionately divide a company’s shares to the founders’ advantage.
Jason Fong is the Head of Business Development of Allianz Asia Pacific and the CEO of Allianz Global Investors Singapore. Allianz represents public investors, or the people who invest in companies post-IPO. Having been with Allianz GI for over 16 years, Jason has bore witness to the financial trends that have come and gone.
In recent times, Allianz has seen sustainability grow as an investment theme. Sustainable investments now represent about 21% of the total assets managed worldwide, and is believed to continue growing in the years to come. To successfully execute sustainable goals in one’s start-up, founders should incorporate it into their business venture’s DNA from the start. “When I think about sustainability, the image that comes to mind is an iceberg. The above line represents from all the financial data that investment banks look at,” Jason says. “Below the line, that’s where you see how the company is built—how do you keep your employees happy, how do you have the proper government structure, and other concerns.”
A PUBLIC INVESTOR’S POINT OF VIEW
When evaluating a company’s below-the-line characteristics, discerning public investors often use the ESG (Environmental, Social, and Governance) Criteria.
- Environment refers to the impact a business has and its efforts to contribute to environmental conservation.
- The Social aspect covers how a company’s employees are being treated and how relationships with suppliers and consumers are managed.
- Governance deals with how the company is led and if it adheres to legal policies.
Ultimately, start-ups should aspire to build businesses that addresses societal needs in a socially and environmentally responsible way. Such values should be upheld as the business continues to grow, to ensure that it remains attractive to investors in any stage.